‘No Holds Barred’ for Oil’s Bullish Sentiment?

If there is one financial asset that is fundamentally not restricted by any form of dovish tone currently, it has to be oil. Events following the just-concluded G20 summit all point to a significant bullish outlook for oil. This started with two of the top global oil producers – Russia and Saudi Arabia – agreeing in principle to cut oil supply following a deal extension. Not long after, the Alberta government mentioned in a report that they would look to cut oil supply so as to provide viable cushion for low oil prices. The Canadian province of Alberta would look to force producers to cut output by 8.7 percent, or 325,000 barrels per day (bpd), to deal with a pipeline bottleneck that has led to an overwhelming scenario in crude storage. This stemmed from local economic issues which include reduction in purchasing power of the populace and increase in unemployment.

Oil surged by 5% on the back of the aforementioned fundamentals. U.S. light crude oil rose $2.92 a barrel to a high of $53.85, up 5.7 percent, before easing to around $53.00 by 0930 GMT (see chart below). Brent crude rose 5.3 percent or $3.14 to a high of $62.60 and was last trading around $61.60.

15-Minute (m15) USOil Chart Highlighting a 5% Surge in Price

 This move in oil price came ahead of the OPEC meeting scheduled for the 6th of December in Vienna. General consensus, is that the cabal would urge its member countries and affiliates to cut production (a move already agreed on by Russia and Saudi Arabia). This would most likely add fresh bullish sentiment in the oil market as market participants would adjust for a possible further supply squeeze.

On the shorter-term and as the fundamentals stand, traders should look for a plausible positions to go long on oil.

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